EUR/USD Weekly Forecast: US Dollar falls apart, what's next?

Market impact: moderately bullish EUR/USD, but vulnerable to sharp reversals.

The main dollar-negative development is the US Treasury’s decision to at least double the maximum size of certain long-duration bond buybacks to $4 billion per operation from September 9. The move can reduce pressure in the 10–30-year sector and ease financial conditions, but it is not equivalent to monetary easing or debt reduction: the Treasury must issue replacement debt, while the fiscal deficit remains unchanged. The larger market signal is that US authorities are increasingly sensitive to elevated long-term yields and bond-market volatility, which may undermine confidence in the dollar’s fiscal backdrop.

For EUR/USD, this supports continued upside through two channels: lower or more controlled US term premiums reduce the relative attractiveness of dollar assets, while concerns over fiscal credibility can encourage diversification away from USD exposure. The pair’s bullish structure is reinforced by stronger-than-expected Eurozone August PMIs and price trading above its major daily and weekly moving averages. However, the bullish narrative is already extended: the article reports a 14-day RSI near 71, increasing the risk of consolidation or a corrective pullback rather than a straight-line advance.

The signal is not unambiguously bearish for the dollar. US services activity accelerated strongly, with the US composite PMI rising to 56.0, which could keep the Federal Reserve focused on inflation and limit expectations for easier policy. Upcoming US PCE inflation, the second Q2 GDP estimate, Jackson Hole communications, and the annual NFP benchmark revisions could therefore challenge the current dollar-selling trend. A hawkish interpretation of Fed communication or firm inflation data would likely lift US yields and trigger EUR/USD profit-taking.

Geopolitical risk adds a two-sided factor. Further US-Iran escalation could raise oil prices and revive inflation concerns, potentially supporting tighter central-bank expectations. At the same time, a broader risk-off reaction would normally favor the USD as a haven, even if this week’s fiscal concerns have weakened that relationship. This creates a risk that EUR/USD initially rises on dollar-specific weakness but reverses if geopolitical stress becomes the dominant market theme.

Technically, the article identifies the 1.1700–1.1710 region as the immediate upside barrier, with 1.1800 and then approximately 1.1850 as higher resistance areas. The cited support structure is concentrated near 1.1630 and the 1.1570–1.1580 zone; a sustained break below that area would weaken the current bullish interpretation and suggest that the move was primarily a short-term USD washout.

What traders should monitor next:

US PCE inflation and Treasury yields, the tone of Jackson Hole communications, NFP benchmark revisions, whether Eurozone growth data continue to outperform, and whether oil-driven inflation or geopolitical risk begins to outweigh concerns about US fiscal management. The near-term bias favors EUR/USD strength, but confirmation requires the pair to hold its breakout while US yields and dollar expectations remain contained.